At Fed Conference, Concerns Surface Over Obama Administration's Performance

(RTTNews) - There is some doubt that the Obama Administration will be able to successfully reform the regulatory system, experts said at this week's Policy Summit held by the Cleveland Federal Reserve. Topics like how to deal with the foreclosure crisis and the future of regulation were addressed, revealing some debate about how much progress will actually be made.

At the conference NYU Stern Professor Lawrence White told RTTNews that he would give the Obama administration a B minus for their performance so far.

White said he is "disappointed" with Treasury Secretary Timothy Geithner's performance, specifically with the inability to get the Troubled Asset Relief Program, or TARP, off the ground. In addition, although the 19 bank stress tests "seems to have a happy ending," White said that might be just luck.

A potential Obama administration member Raphael Bostic, the nominee for Assistant Secretary for Policy Development and Research at Housing and Urban Development, noted some failures of previous administrations, and explained his vision for the housing market moving forward.

"We don't use our community based institutions as well as we could…both in terms of providing vehicles and education," Bostic said.

Following his speech, Bostic told reporters that the government is looking to turn what has been the worst recession since the Great Depression into an opportunity to reform a regulatory system.

"There are conversations at all levels of government on how we can make lemonade out of lemons," Bostic said.

Although housing was a focus of the conference, the future of the regulatory system - a hot topic as of late - made its way into the sessions. How to restructure the system, rather to wipe it out and start from scratch or try and salvage what is left, is one of the questions officials are facing.

Peter Skillern, executive director of the Community Reinvestment Association of North Carolina, said that he did not see a complete restructuring of the regulatory system in the wake of the crisis.

"Financial regulatory reform is imperative…the complexity is enormous…and the power of the decision makers is in relatively few hands," Skillern explained.

However, Skillern suggested that while a system-wide approach, or macro-prudential regulation, would be most desirable, he does not foresee the government making that drastic a change.

"I don't believe that there will be major restructuring," he said. "I think that what will happen is that we are going to reform what we have."

He called for increased transparency and increased separation from financial institutions and ratings agencies.

"Financial institutions that might be too big to fail may be too big to exist," he said.

After his participation in the panel, Skillern told RTTnews that while he believes that officials that have come out in support of macro-prudential regulation, including Federal Reserve Chairman Ben Bernanke and FDIC Chairman Sheila Bair, are performing well in their positions, the political roadblocks to passing such a major restructuring will prevent the new system-wide approach from taking effect.

"I'd like to believe it can be done," Skillern said. "But maybe I'm just a cynic."

In testimony before Congress earlier this month, Fed Chairman Bernanke suggested that as part of the reform a more macro prudential or system-wide approach would be helpful.

There "needs to be a more collaborative system," he said, noting that the current system focuses on individual areas, leaving some parts of the system unregulated and open to high leveraging.

"I think a more macro prudential or system-wide approach would be helpful," the Fed Chairman said.

Last month, Bair offered a fairly detailed plan to create a system-wide supervision. She recommended that Congress establish a systemic-risk council with representatives from the FDIC, Federal Reserve, Treasury Department, and Securities and Exchange Commission each playing a role.

"Centralizing the responsibility for supervising institutions that are deemed to be systemically important would bring clarity and focus to the efforts needed to identify and mitigate the buildup of risk," Bair said.

For comments and feedback: contact editorial@rttnews.com Copyright(c) 2009 RTTNews.com, Inc. All Rights Reserved

More News:   Market Updates | Stock Alerts | All Trading News | Stock Index